Covenant Financial Buying Diamonds as Hedge Against Inflation

May 23 (Bloomberg) -- Covenant Financial Services LLC, a
hedge fund based in Oklahoma City, is betting that demand for
precious gemstones in China and the Middle East will boost
prices for the assets in three years.

Covenant has been building a collection of “large, rare
and highly sought after” stones, including the 77-carat Yellow
Rose diamond, to bolster its $275 million of assets, the company
said in a statement released today.

The fund has been buying diamonds since November as a hedge
against inflation and as an alternative to gold and oil, said
Covenant spokesman Will Thompson in Atlanta. Gems account for
less than five percent of assets, he said.

“One of the trends we are seeing now is an enormous multi-generational transfer of wealth take place from the West to the
East, and moving a small portion of our capital into diamonds is
one of the ways we are profiting from this,” Steve Shafer,
Covenant’s chief investment officer, said in the statement.

Americans and Europeans are offering diamonds at 50 cents
to 60 cents on the dollar in an attempt to preserve businesses
or real estate holdings, Shafer said. The fund is buying the
stones to keep for one to three years, he said.